Starting in January, N.C. sales tax will expand to include a privilege tax on admission charges to events, such as live performances at the Agri-Exposition Center, movies at Eastpark Cinema and local productions at Sampson Community Theatre — the legislation will likely mean a 7 percent hike on those tickets.
The legislation, effective Jan. 1, 2014, imposes a privilege tax on a retailer at the 4.75 percent general state and applicable local and transit rates of sales and use tax, which equates to 2.25 percent in Sampson, to admission charges for various entertainment activities. That encompasses a live performance or other live event of any kind; a motion picture or film; and a museum, cultural site, garden, exhibit, show or similar attraction.
“What it will do is impose a privilege tax on retail sales on all admission charges to a live event. In the past, we’ve not had to charge sales tax on tickets, so this is new,” said Ray Jordan, director of the Sampson Agri-Exposition Center. “We have tried to speak to as many groups as we can about this. A ticket purchase will be taxed at 7 percent. This does not exempt non-profits.”
For example, Jordan said, a dance teacher sponsoring a recital would be subject to the tax. Similarly movies at Eastpark, as well as tickets to community theater performances would be subject to the same tax.
“If you’re having a live performance, whatever it is, if you’re charging admission, there is sales tax to be collected,” said Jordan. “It’s been tough for people to wrap their heads around this, but what we’re trying to suggest is not to absorb this price but to add it to their ticket price.”
He noted that the price does not have to be on the face value of the ticket, but when the transaction takes place, there will be a tax added.
“If they absorb the price, they’ll only get $9.30 on a $10 ticket,” Jordan noted.
Jordan said it was important to let people know about the tax, because many changes to sales tax and hikes on expenses might not be known until they have already come down the pipe and taken effect.
“We felt that if the Arts Council raised their price by $1 to cover the sales tax, people might just think we went up on their tickets (for no reason),” said Jordan.”We don’t want folks to think that everyone is jacking their ticket price up.”
For any tickets sold at the Agri-Exposition Center for events they are sponsoring, that sales tax will be collected by the center. For renters who are having tickets sold by the Agri-Exposition Center, that tax will similarly be collected by the facility. However, those who are selling tickets independently for a live performance, will be subject to collecting and paying that tax.
“The tax has to be collected by whoever is selling that ticket,” Jordan said. “The customer can pay for it, but the tax also has to be reported.”
So for that dance teacher, or that beach music fundraiser or class reunion that includes live bands, they will be required to collect sales tax under the new law. For some who have a sales tax ID number already, they know the routine. However, others will have to visit the Department of Revenue and fill out the requisite information to obtain a tax ID number.
“You have to go online and set up a sales tax number,” Jordan explained. “You become a tax collector. Some might have sales tax numbers, so it’s no big deal. Some businesses are selling services (and don’t have to have an ID number), but when you have goods, you have to collect taxes. That’s where some issue could come in.”
An admission charge includes a charge for a single ticket, a multi-occasion ticket, a seasonal pass, an annual pass and a cover charge. When an admission ticket is resold and the price of the admission ticket is printed on the face of the ticket, the tax does not apply to the face price at the time of the resale of the ticket, according to the new state statute. The reseller must retain in its books and records the amount originally paid for the ticket to be able to substantiate the amount of the resold ticket that is to be excluded from the tax at the time of resale.
Exemptions are provided for an event held at an elementary or secondary school and is sponsored by the school; a commercial agricultural fair; a festival or other recreational or entertainment activity, as well as a youth athletic contest, sponsored by a nonprofit entity; or a state attraction.
So for school performances at, and sponsored by, the school, there is no sales tax. The same is true for admission to school athletic and band events that take place on the school grounds.
Jordan said the expansion of the sales tax is “spreading the joy, so to speak.”
“That 2.25 percent is going to the county,” said Jordan. “Everybody is participating. It’s a shared tax. The impact will come to these nonprofits. it puts the burden on them. You have to file (those tax records) and do it each month.”
For those events occurring before Jan. 1, there will be no impact, said Jordan, noting an upcoming Shriners event that will be unaffected. However, for those events in January and after, the sales tax will be in full effect.
“Anything that is live entertainment will be taxed,” said Jordan. “The only things exempt are state attractions. There are no exemptions for nonprofits. This applies to everybody.”
Changes could come down the road with modifications to the legislation to exempt some nonprofits, but those changes will not happen before Jan. 1, Jordan noted. Those selling tickets for live performance events at the beginning of next year should look into acquiring a sales tax number now, he said.
“They can go online to the Department of Revenue and register for a sales tax number. When you register, you’ll get an email back with a payment coupon book,” said Jordan. “It’s a very easy process. It’s not tough.”
The N.C. Department of Revenue can be visited online at www.dornc.com.
Chris Berendt can be reached at 910-592-8137 ext. 121 or via email at email@example.com.